Introduction

When it comes to purchasing a new mattress, consumers are faced with an overwhelming number of options. From different sizes, firmness levels, materials, and pricing, the choices seem endless. Mattresses can also be quite expensive, with prices ranging from the low end to the high end of the market.

Traditionally, the mattress industry has followed a brick and mortar business model. However, over the past decade, the industry has undergone significant changes, with the emergence of direct-to-consumer brands challenging the dominance of legacy mattress makers such as Tempur Sealy and Serta Simmons. While legacy brands still lead the market, direct-to-consumer disruptors like Casper, Purple, and Saatva have revolutionized the way customers buy beds by offering a convenient and transparent shopping experience. In this article, we will explore the transformation of the mattress industry and the factors that have influenced its evolution.

How Beds are Made

The cost of a mattress is determined by the materials used in its production and the methods by which customers purchase it. Profit margins for mattresses priced around $1,800 can range from 30% to 50% or even higher. The cost of making a mattress fluctuates based on commodity prices, such as steel. For example, between 2017 and 2022, steel prices increased by 16%, but they are expected to decrease or level a bit by the end of 2023. Marketing can be a significant portion of the costs associated with a mattress for some brands.

The way mattresses are constructed varies, with some manufacturers opting for cheaper methods, while others focus on premium quality. Ron Rudzin, CEO of the Direct-to-Consumer brand Saatva, explains that their approach involves tempering the steel used in their coil units, resulting in a higher quality product.

The process of making a traditional bed involves using raw materials like foam and cotton, which are then cut and stitched together by hand. Various layers of foam and coils are assembled to create a customized bed based on customer orders. The final product is inspected, wrapped, and packaged for delivery. Every manufacturer has their own level of commitment to quality.

Disrupting the Traditional Retail Model

One of the main reasons behind the rise of direct-to-consumer mattress brands is the desire to eliminate the inefficiencies and high costs associated with the traditional retail model. The traditional mattress buying experience was often daunting for consumers, with confusing product options, pricing tactics, and limited competition.

Justin Taylor, the founder of restedmattress.com, created his platform in 2023 to alleviate the challenges of choosing the right mattress. He explains that historically, the mattress industry played pricing games, such as selling the same mattress under different names and artificially inflating prices only to offer discounts later. This led to customer confusion and frustration. Focusing on the fitting process can really ease the confusion from this. Rested Mattress readers know more about finding the right fit so they can wade though the options available to them.

Traditional mattress retailers relied on licensing arrangements, whereby manufacturers would develop products specific to certain retailers, leading to a proliferation of similar products with different names and prices. The lack of transparency in pricing further added to customer confusion.

The Rise of Direct-to-Consumer Brands

In the early 2010s, direct-to-consumer mattress companies started to emerge, disrupting the traditional retail model with a new approach to selling mattresses. These companies, including Casper, Purple, and Saatva, focused on business model innovation rather than product innovation. They eliminated the need for middlemen, costly storefronts, and high overhead costs by selling directly to consumers online. This allowed them to offer competitive pricing and pass on the savings to customers.

Through multi-million dollar marketing campaigns, these brands addressed the pain points experienced by consumers when buying mattresses, such as the in-store experience, product confusion, and pricing tactics. Their messaging resonated with consumers, positioning them as the saviors who could provide a better alternative to the traditional mattress shopping experience. However, some discerning shoppers wonder if the quality of these brands can match their advertising budgets.

Challenging the Legacy Brands

The rapid rise of direct-to-consumer brands posed a significant challenge to industry leaders like Tempur Sealy, Serta, and Simmons. Between 2015 and 2018, an estimated 225 new direct-to-consumer companies sprouted up, resulting in a decline in market share for legacy brands. Tempur Sealy, for example, saw net sales decrease by more than 14% during that period.

Legacy brands had to adapt to the changing landscape by expanding their online presence and simplifying their pricing structure to compete with newer players. At the same time, direct-to-consumer brands like Casper, Purple, and Saatva began moving into physical retail stores, recognizing the importance of offering customers both online and offline shopping options.

The Steady Growth of the Mattress Industry

While the explosive growth of direct-to-consumer brands has slowed in recent years, the mattress industry has continued to grow steadily. The pandemic, despite causing disruptions and supply chain issues, actually boosted mattress sales due to increased disposable income from stimulus funds and unemployment benefits, as well as a rise in savings. However, the industry has also faced challenges, particularly in 2022, where record-breaking inflation has caused consumers to prioritize their spending and put big-ticket items like mattress purchases on hold.

Mattress sales serve as an indicator of consumer sentiment and economic health. When there are spikes in gas prices, stock market crashes, or global conflicts, mattress sales tend to slow down. For example, during the Ukraine war in late February 2022 and the subsequent increase in gas prices, mattress sales immediately slowed. Companies like Tempur Sealy and Sleep Number experienced negative quarterly results due to weakened sales during that period.

Legacy mattress companies like Tempur Sealy have recognized the importance of adapting to the changing industry landscape. They have expanded their business from traditional retail models to incorporate e-commerce platforms, allowing them to compete with direct-to-consumer brands. On the other hand, direct-to-consumer brands have begun moving into physical retail stores, partnering with traditional mattress retailers to provide customers with more options.

The Future of the Mattress Industry

The future of the mattress industry relies heavily on consumer confidence. As inflation impacts the price of materials, the cost of mattresses may increase, which could potentially affect sales. However, the mattress industry has historically shown resilience, with long-term growth projected at around 5% per year. Consumer preferences and shopping habits will continue to shape the industry, with a focus on convenience, transparency, and competitive pricing remaining essential factors for success.

In conclusion, the mattress industry has undergone significant changes in the past decade, thanks to the disruptive force of direct-to-consumer brands. These brands have challenged the traditional retail model by offering consumers a more convenient and transparent shopping experience, while legacy mattress companies have adapted to the changing landscape by embracing e-commerce and simplifying pricing structures. The industry's future depends on consumer confidence and the ability of manufacturers to navigate inflationary challenges. Ultimately, consumers will continue to seek comfortable and affordable sleep solutions, pushing the industry to innovate and evolve.